Technology diffusion in the digital era

Productivity advancement permits economies to boost output without having expanding inputs and is a vital driver of economic development and of income for each capita. Nevertheless, productivity progress has been slowing in recent a long time, depressing economic advancement. This may seem paradoxical given the rapid progression in technological progress and the spread of electronic technologies.

Firms’ assorted performances during this period of digital transformation aid explain this puzzling paradox. Though companies at the world frontier of productiveness have continued to increase their productivity steadily, the rest of the company inhabitants has not retained rate.

The productiveness hole in between frontier firms and the rest has greater (Determine 1). The hole has widened much more in sectors that count far more heavily on the use of knowledge and digital technologies. These tendencies increase troubles for the inclusiveness of financial expansion in the digital era.

A widening labor productivity gap between frontier firms and other firms

Technological innovation DIFFUSION IS Critical FOR Economic Development AND INCLUSIVENESS

As we talk about in our chapter in “Shifting Paradigms,” examining the dynamics of technological know-how diffusion in the context of adjustments introduced by electronic transformation is important to conveying these efficiency trends.

Know-how diffusion can be a gradual and gradual procedure, uneven throughout international locations, regions, sectors, and firms—and even in just narrowly defined sectors in the similar place.

Although corporations at the world frontier of efficiency have continued to maximize their productiveness steadily, the rest of the enterprise population has not held rate.

New OECD analyses demonstrate that the raising productivity gap involving the most productive firms and the relaxation could be a reflection of a slowdown in engineering diffusion. This is particularly the scenario in the most electronic- and awareness-intensive sectors. Laggard companies in these sectors deal with greater obstacles and capture up at a slower speed.

Shifts to a electronic and knowledge economic climate pose 3 new issues for corporations. Initially is a mounting worth of intangible assets, these kinds of as study and development (R&D), software program, and other intellectual assets, in the output processes. Second is an increasing job of tacit understanding. Third is soaring technological complexity demanding increasingly innovative complementary investments in regions this sort of as worker expertise and organizational innovation.

The have to have for complementary investments in intangibles, the non-rivalry and minimal-value scalability of digital technologies, and the related scale economies and network externalities build and boost winner-requires-most dynamics, specially in electronic-intensive sectors. These elements may perhaps allow for superstar companies to prosper and obtain sizeable current market shares even though performing as limitations for other companies to adopt new systems and for new players to enter the marketplace.

Weakening know-how diffusion is not only linked with rising productiveness divergence, but it also influences other socioeconomic outcomes. It performs a part in outlining the new declines in small business dynamism, the increase in focus and markups in numerous industries and nations, and trends in labor revenue shares and wage inequality.

The polarization concerning leading firms and laggards has been amplified even further more by the COVID-19 pandemic. Though there has been an acceleration of digital adoption in the course of the pandemic, the amount of adoption of digital technologies and their sophistication have been pretty heterogeneous: Tech-savvy firms, typically previously far more effective and much larger, have adopted far more and far more innovative digital technologies than lesser, considerably less tech-savvy firms. In the same way, although teleworking has been important to sustaining production in the course of the crisis, not all companies have been equipped to (re)organize their actions remotely. The pandemic could, in this way, insert to the benefits of ex-ante digitally innovative firms. These dynamics, collectively with shocks to business registrations, may perhaps amplify declines in company dynamism, boost marketplace focus, and weaken opposition.

So, the results of the pandemic have strengthened the require for policies to improve technology diffusion and foster ailments for wide-based mostly growth of firms.

General public Plan IS Critical TO BOOSTING Technological innovation DIFFUSION

Governments can enjoy an essential purpose in fostering engineering diffusion. General public policy can help eliminate barriers to diffusion and improve firms’ absorptive ability by addressing ability and monetary constraints to know-how adoption, utilizing powerful study and innovation insurance policies, regulating data obtain and possession, and ensuring a stage playing discipline and a aggressive atmosphere.

No solitary coverage can foster technological know-how diffusion on your own. A thorough plan mix, thinking of both demand from customers-aspect and offer-facet measures, that bolsters firms’ incentives and abilities is needed.

Demand from customers-side steps would raise recognition about new systems, acquire absorptive capability, and cut down risks. Provide-side measures would foster competitors, broaden entry to innovation funding, address the new regulatory difficulties of the electronic economic system, increase awareness generation and sharing (such as by way of reasonable intellectual house guidelines), and improve the basis of electronic infrastructure and techniques.

Supporting wider technological innovation diffusion, in specific for modest and younger companies, collectively with steps to raise enterprise dynamism, equip employees with new techniques, and foster good labor marketplaces would permit the accomplishment of economic progress that is much better as effectively as far more inclusive and sustainable.

Synthetic INTELLIGENCE: THE Subsequent Section

Hunting forward, consideration is now focusing more and more on the future phase of the digital revolution, led by synthetic intelligence (AI), and how it might affect productivity. There is substantially dialogue about the possible of AI to be the up coming major basic-intent know-how, spawning complementary improvements in a selection of purposes throughout sectors. These may well be connected to unique application or components, significant details analytics, machine understanding, cyber-physical techniques, or programs embodied in robots or other artifacts, with distinct systems possessing unique qualities and ability requirements.

Not too long ago, there has been a sturdy acceleration in the number of AI-connected publications—the understanding base of AI—combined with a substantial boost in the share of AI-relevant inventions. This suggests an rising unfold of AI throughout international locations, while information and analyses about its diffusion across companies and sectors are even now scant, specifically over and above the United States.

Ongoing research at the OECD aims to fill this gap by analyzing the motorists and implications of AI adoption and diffusion. It ranges from measurement of AI developments, such as patents and logos, to the expertise wanted in AI-similar jobs. This was reviewed at a digital convention held previous year, and the most up-to-date investigation will be offered in a forthcoming meeting upcoming thirty day period exactly where a aim will be the implications of AI adoption and diffusion for productiveness and small business dynamics.

Authors’ note: the sights expressed right here are people of the authors and ought to not be attributed to the OECD or its member nations around the world.